Macquarie-Shenzhou International（2313.HK）Revisiting Adidas.pdfVIP

HONG KONG Shenzhou International 2313 HK Outperform Price (at 07:59, 05 Mar 2015 GMT) HK$30.15 Revisiting Adidas Valuation HK$ 32.20 Event - PER 12-month target HK$ 32.20  Continued diversification into synthetic materials/ sportswear is a key growth Upside/Downside % +6.8 driver for Shenzhou, which has traditionally thrived in cotton knitwear. Four 12-month TSR % +10.0 customers – Fast Retailing, Nike, Adidas and Puma – make up est. 31%, Volatility Index Low/Medium 22%, 22% and 9% of Shenzhou’s OEM sales, respectively. We know Fast GICS sector and Nike are the clear growth leaders but we have had conservative Consumer Durables Apparel expectations for Adidas as our channel checks with Hong Kong-listed OEMs Market cap HK$m 42,180 suggest that it has been slower in apparel product innovation than peers. Market cap US$m 5,439 Adidas’ strong 4Q14 result last night however positively surprised us. Free float % 40 30-day avg turnover US$m 5.1 Impact Number shares on issue m 1,399  Excluding the ailing hardware segment, Adidas group net sales were up Investment fundamentals 10% YoY in 4Q14, driven by Greater China and European EMs. Apparel is Year end 31 Dec 2013A 2014E 2015E 2016E Revenue